A giant leap - 2

30 August 2018

A SMALL STEP IN ELECTRONIC SIGNATURE - A GIANT LEAP FOR ELECTRONIC DEEDS REGISTRATION

I have read articles reporting on the welcome acceptance of a Power of Attorney to transfer land, signed using an Advanced Electronic Signature, by the Registrar of Deeds in Bloemfontein. I have also read with disappointment and surprise the comments that the report sparked - [see A giant leap and the comments thereunder].

The headline to the report is perhaps misleading by signalling an “electronic registration”. The first line of the report indicating that the “…deeds office registered its first electronically signed property transfer” is also an overstatement. A reading of the article, however, clarifies that the Power of Attorney was signed electronically using an Advanced Electronic Signature (AES), a printout of the Power of Attorney certified in terms of Section 15(4) of the Electronic Communications and Transactions Act (ECT Act), thereafter lodged with and accepted by the Registrar.

The failure of the article to accurately headline the detail of what occurred must not be allowed to detract the critical significance of this development for conveyancing in South Africa or the lawfulness of the registrar accepting the printout. This is not a trivial nor, as one commentator termed, a “premature” step. On the contrary exploring how we can lawfully use modern technology in conveyancing is long overdue. Indeed, the solution providers and attorneys should be congratulated on their initiative and the Registrar applauded for playing a part in this breakthrough step, for the reasons set out in this article.

Socio-Economic Imperative
Only those that are not paying attention will argue that land reform is not a critical socio-economic and political issue. One of the many challenges that we must address is the delivery of rights in land to citizens. Achieving this goal is absolutely dependent on an efficient, secure and cost effective deeds registry system.

In essence the deeds registry is a large information system and it would be foolish to continue to ignore the benefits that modern technologies hold in the processing of information. As a profession, the indisputable duty of which is to serve the well-being of all South Africans, we must recognise and accept responsibility of our role in fulfilling the duty to optimise the security, efficiency and cost benefits that can be unlocked by using information and communications technologies in the provision of legal and administrative services. This includes preparing, processing and ultimately the registration of deeds.

To some this may seem terrifying but the home-grown example of the de-materialising share certificates and the re-engineering of the registration of shares traded on the JSE as well as the payment mechanisms employed, are evidence that this can be done successfully if tackled correctly and with a will that has been unfortunately lacking up to now.

Brief History of the Electronic Deeds Registry System Concept
With great foresight the then Chief Registrar of Deeds, Mr Jan Slothouber, formed a task team to address the issue of an Electronic Deeds Registration System (EDRS) as long ago as 1996. I had the privilege of working on that task team and in 1999 the team provided detailed recommendations on how to address the transition to electronic deeds registration. Regrettably, despite the significant work and value of what was considered the recommendations made were, for reasons that remain opaque to me, not accepted or actioned by the powers that be. I am not suggesting that some 18 years later newer technologies (Blockchain springs readily to mind) would not provide solutions that would achieve the desired outcomes more elegantly than contemplated in the late part of the last century. Indeed many solutions such as digital signatures (as opposed to digitised signatures) have developed significantly and the legal clarity that the ECT Act brought some years after the recommendations were tabled was, at the time of the task teams deliberations, absent. Despite this the conceptual framework remains as relevant today as it was then.

In 2016, consideration of EDRS was resurrected in the initial Electronic Deeds Registration Bill published for comment by the Minister of Rural Development and Land Reform. After initial consultation it was acknowledged that the approach reflected in the Bill was flawed and the Bill was re-drafted to allow for a more consultative process that one hopes will incorporate the interaction of all information systems pertinent to deeds registration, including the integration of information systems that are and will in the future be used by conveyancers

Signatures
At the core of the conceptualisation of an EDRS by Mr Jan Slothouber’s task team was the recognition that signatures, confirming various checks and stages in the process as well as the endorsement or execution evidenced by signatures, would in an EDRS require secure electronic signatures. I hasten to point out this was before the development and enactment of the Electronic Communications and Transactions Act in 2002 (ECT Act) and definition of Advanced Electronic Signatures (AES). The use of reliable signatures as stipulated in the laws of other countries guided the consultations at that time.

The ECT Act introduced AES, which are digital signatures, the issue and use of which is governed by a Certification Authority (CA) adhering to and enforcing internationally accepted rules and standards. Where the CA wishes to provide AES the ECT Act and regulations require that the operation of the CA is overseen by an Accreditation Authority (a statutory body established in the ECT Act) and that the CA’s operations are subject to stringent and regular audit.

The ECT Act expressly stipulates that where a signature is required by law, as is the case with signatures that are core to the deeds registration process, an AES must be used.

By the nature of digital signatures (and AES) they enable the “locking” of electronic information to which the signatures are applied in the manner that any tampering with the signature or the text (data) to which the signature is associated will immediately be detectible. Because of this feature many of the time consuming and expensive checks that have been developed to ensure security of our current deeds registration system can be eliminated, leading to a far more efficient, cost effective and secure system, than is currently the case. These benefits simply cannot be ignored.

Thus, while some may be tempted to trivialise the importance of the acceptance a Power of Attorney signed using an AES, it is a significant leap towards the ultimate goal of the development of an EDRS.

Lawfulness of Electronic Signatures
The sections of the ECT Act relevant to the legal recognition and facilitation of electronic transactions (Chapter III) are based on the United Nations Commission on International Trade Law (Uncitral) Model Laws on Electronic Commerce and Electronic Signatures. These model laws have informed and shaped evolving legislation globally and assisted governments if facilitating the development of law governing the use of information and communications technologies. Thus, it can be accepted that the principles in the ECT Act reflect a universal understanding of how electronic communications and transactions should be dealt with.

Central to the model laws and Chapter III of the ECT Act is the concept of functional equivalence. It is recognised that the rules governing the use of paper and text, because the media is so different to electronic communications and records, must be different if they are to achieve the functions designed to safeguard the integrity of what was initially written and what is read at a later time.

In dealing with land transactions appropriate information security management systems governing how we use the technologies are critical to the integrity of systems that may be established. That is why the Uncitral Model Laws and our ECT Act are underpinned by the recognition that security measures applicable to paper and text-based systems will not be identical. Understanding the safeguards introduced by the ECT Act requires an understanding of the functional equivalent requirement on which the law is based.

“Reliable signatures” as they are termed in the model laws, have certain characteristics. These require that the electronic signature identify, is linked to and is under the sole control of the signatory. In addition any change to the signature or data to which the signature is associated must be detectible. These principles with the addition of face to face authentication (which facilitates the first two requirements of identity and linking the signature to the signatory) are requirements for an AES in our law. This fulfils and exceeds the functional equivalent requirement and the requirements that our law and practice previously developed governing hand written signatures over many centuries.

The ECT Act itself has as its objectives, among other, to:

Recognise the importance of the information economy for the economic and social prosperity of the Republic;

Remove and prevent barriers to electronic communications and transactions in the Republic;

Promote legal certainty and confidence of electronic communications and transactions; and

Develop a safe, secure and effective environment for the consumer, business and the government to conduct and use electronic transactions

The Act goes on to state in the Interpretation provision:

“This Act must not be interpreted so as to exclude any statutory law or the common law from being applied, recognising or accommodating electronic transactions, data messages or any other matter provided for in this Act.”

The ECT Act is imperative in the statement of its objects and the fact that we must not create barriers to the use of electronic solutions that pervade our 21st century lives. The use of electronic information where it can be used is both supported by our law and indeed it may well be unlawful to prevent its use.

Criticism
While I accept that the article reporting the use of AES to sign the Power of attorney may have been penned with greater clarity, I remain somewhat astonished by the comment and criticisms that have been raised.

In the first instance the lawfulness of the acceptance of the printout of the Power of Attorney signed using AES and duly certified in terms of section 15(4) of the ECT Act is questioned. One commentator has indicated this is in contravention of RCR50/2006, which states:

“Only originally signed documentation is permissible.”

In 2006, although the issue of AES was addressed in the Act, the Regulations governing the accreditation of providers of AES had not yet been published and no providers of advanced electronic signatures had been accredited. The necessity for the ruling can be understood as in 2006 no “secure” signatures meeting the requirements in the ECT Act were available. This, however, changed in 2012 when Regulations had been published, the first AES provider was accredited and AES became a practical reality. Aside from anything else in terms of the ECT Act an electronic record signed using an AES (which locks the document so no changes can be effected) is an original and is signed therefore it meets all of the requirements of the resolution. It is submitted that any failure by a Registrar to accept the use of an electronic transaction or communication that complies with the ECT act where the Registrar is in a position to do so, would be unlawful. I certainly cannot see how a resolution (particularly a very outdated resolution) binds the Registrar to a patently unlawful action.

While I do not believe that social media is an appropriate forum to debate this issue, I would be more than happy to engage with representatives of the legal profession, the Office of the Chief Registrar and the Department of Rural Development and Land Reform, as I am confident that it can be shown indisputably what has been done by the solution provider, the attorney and the Registrar is perfectly lawful and must be accepted as a primary step to progressing our move to an EDRS in time. Only those opposed to progress and the need for the enhancement of our Deeds Registry system to meet the socio- economic necessity outlined above would argue otherwise.

A further criticism or observation that has been made is a challenge as to whether the signature of a power of attorney electronically renders this part of the process “hassle free”. In this regard I believe what has happened should be seen for what it is. It is one of the many steps that can ultimately unlock the potential for EDRS that will undoubtedly benefit all stakeholders. Indeed, the observation is made by the commentator that the delays in the process of transfer of land really relate to obtaining rates clearance certificates. It is ironical therefore that there is a lack of recognition for the huge efforts that have been made by the solution provider in using advanced electronic signatures as part of the solution to facilitate and speed up obtaining rates clearance certificates. Indeed the information that I have is that where local authorities have implemented electronic rate clearance technologies the overall reduction in the time between instruction and registration is significant. The outcry from all stakeholders when the Chief Registrar of Deeds threatened to discontinue this practice in late 2015 was profound, as were the efforts of the solution provider in assisting the profession to avert what was regarded as a crisis. It should also be noted that the acceptance by registrars of printouts of rates clearance certificates signed using AES is identical in principle to the acceptance by a registrar of a printout, duly certified, of a Power of Attorney signed using AES.

Finally, one of the commentators has warned that this is a step in a process to eventually take conveyancing work away from conveyancers. He notes that he is “all for technical innovation but that he has an uneasy feeling in his gut.” My comment as an attorney of 37 years and a practicing conveyancer for much of that period, is that the profession has doggedly resisted change and the proper adoption of technology to its own detriment. I also believe implicitly that conveyancing should remain the domain of the profession. I question, however, whether if we are the barrier to inevitable and much needed change whether we deserve that “entitlement”.

Conclusion
Change is by its nature disruptive and we are living in a time that has seen unprecedented change and disruption. Through most of my professional career been seized with the practical and legal implications of the introduction of modern technologies and the disruption it inevitably causes, I recognise and advocate the need for an evolutionary and careful approach in the implementation of changes to a system as fundamentally important as our deeds registry system.

The small step of replacing a paper document with an electronic document, and a pen signature with an equivalent electronic one is indeed a Giant Leap for the industry. In the context of the signing of a Power of Attorney and its printout for lodgement in the deeds office it is a small step in optimising the process that holds no risk for the integrity of the deeds registration system. It is nonetheless significant in its recognition of law that influences the inevitable transition from paper documents to electronic records.

As a profession that has proved to be resistant to change as opposed to embracing change even where there are demonstrable benefits the question that we need to ask ourselves is: Do we wish to protect and maintain institutions and systems which are beyond their “sell by date” because it is convenient for the profession to do so, or do we wish to support the development of systems that will benefit not only the profession but also the society we are obliged to serve?

@Mark, most conveyancers agree that we need to innovate our profession, I do not think that is the issue. Conveyancers appreciate how much easier companies like LexisNexis and E4 have made our work, albeit at a cut of our fees. We've allowed them entry, an irreversible permission we allowed. Again, this is not the issue at hand. Your argument above portrays conveyancers as being the limiting factor here. You are suggesting we support an "illegal" service, almost as if arguing for the benefits of contraband medicine; these are the advantages and this is how much cheaper it can be acquired!

How do we innovate if we are restricted by archaic legislation? Politics and corruption are some of the most sidestepped reasons why we do not have an electronic registration system yet. Who will get the highest bribe to develop and implement such a system? Or how will it affect our voter numbers? I guess that questions have not yet been established or we would have had an EDRS by now. External companies like LexisNexis and E4 have and are benefitting from the situation that, for some or other reason, the registrar and conveyancers cannot cooperate to deliver the affordable and efficient deeds registration service expected by our clients. Nowhere have I read any comments from the registrar or the department on whom we are totally reliant to implement any innovation.

Why are we arguing this amongst ourselves if we cannot really change things? Come on LexisNexis and E4, market you innovation to government, not to conveyancers. Our clients cannot afford both your technology as well as our professional services anymore! Home Affairs, banks, etc. are all announcing technology implementation such as biometrics etc. Who pays for that? What do we as conveyancers do to retaliate against high costs? We take the registrar to court if she demarcates the deeds Pta/Jhb deeds office! Really? Is that how we stand together to "innovate" our "sacred" profession? There is a lot of work to be done but without the registrar's buy-in our efforts will be futile no matter how much time and money we spend trying to comprehend why we were left behind.

Suppliers like LexisNexis, E4, ProxiSmart and estate agencies will become competitors as opposed to suppliers if conveyancers do not embrace the importance of the registrar and work with her instead of against her. They are innovating our profession while we are sitting and arguing why and how it should be done. Conveyancers know what complicated matters we can resolve but that is not what our market wants to hear. How great we are, how long, difficult and expensive our legal education was and how we deserve every penny we charge. Our market wants to hear how cheap, quick and efficient can we serve them.

Let that be our aim, delivering a quality, superior service that is inimitable to our suppliers, affordable and efficient to our clients and which service we can deliver with the full cooperation of and respect for the role of the registrar. Once we have achieved this, the registrar might support our efforts to create, develop and implement technology advances. Who knows, we might even end up one day working together to improve the actual quality of conveyancing services.

Mark Heyink28/08/2018:

Although I am an advocate of embracing change and using modern technology where appropriate I don’t think that social media affords the platform for the debates that the future of EDRS demands or deserves. Nonetheless the comment of Magnus is interesting, some of it commendable, but some of it is both inaccurate and misplaced and I feel that it calls for a response.

Please forgive me if I expressed myself poorly, but I had no intention of suggesting that conveyancers “…support an ‘illegal’ service…”. On re-reading the article it is clear to me, if not to Magnus, that I am stating that if the ECT Act is properly read what was done is not unlawful and rather, had the registrar failed to accept the Power of Attorney, that that may have been unlawful. As also indicated in the article, it is important at that attorneys become familiar with the ECT Act and the jurisprudence that underpins its rationale and interpretation. It is after all 16 years since its enactment and we are well past the dawn of the information age that is shaping so much of what our clients do and expect. We need to accept that it is also shaping their expectations of the profession. I really hope that my suggestion that we understand the law and that we seek to apply it to our advantage cannot seriously be compared to “…arguing for the benefits of contraband medicine…”.

Conveyancers are quite rightfully the orchestrators of the conveyancing process. We did not “allow” the service providers entry with an agreement to share fees. That would have been unprofessional, as to use Magnus’ term our “sacred” profession is prohibited from sharing “our fees” with lesser mortals. We use technologies provided by the service providers to assist us in providing a more efficient and cost effective service. As is usual the service providers for this. If we are not using the technology to achieve efficiency and cost savings, why we do so at all must be questioned. Thus if this is our domain and, as Magnus has indicated, we need to protect it by “delivering a quality, superior service”, we need to ask whether this goal can be achieved without leveraging technology. (I seriously doubt that if technology is a critical element of delivering this aim that the profession is capable of doing this without committed service providers). If technology is a critical element we must not be asking service providers to “market their innovations to government” but working with the technologists in discovering and developing the appropriate solutions that can be marketed by the profession.

We really need to act rationally and recognise that we need a multidisciplinary approach in the interactions with all of the actors in the conveyancing process (Who, by the way, all already have technology service providers that conveyancers will need to interact with if a holistic EDRS solution is to achieved).

Do we want to be metered taxi drivers in a time of Uber, railing against the injustice of a threat (real or perceived) that modern technology may hold to processes that can undoubtedly be enhanced by the use of technology, or do we want to be part of the solution?

MARK SCHAFER30/08/2018:

I really don't have the time to engage fully in this debate which possibly should take place within a gathering of the conveyancing profession - and by that I don't mean the property committees of the various law societies. I certainly embrace the way that technology has made the conveyancing process more efficient. When I started out there were still typewriters on the desks of conveyancing " typists", cell phones did not exist and the fax machine was a recent innovation.

Technology is a two edged sword and while it has made life easier in many aspects, it has created a whole lot of other problems and we are all running around trying to counter the negative consequences of enhanced technology. Just think of the hoops we jump through to prevent fraud that is more prevalent because of the gaps that technology has opened. Whilst I try to use every reliable aspect of technology to process my conveyancing work, we need to remember that ultimately most of our work revolves around enabling people to move into homes and the financing related thereto. We are dealing with people and their emotions and their agendas and time scales. Technology must work for us - we must not become slaves to it. It must be about doing things better - not necessarily faster.

An electronic signature might be a great innovation in the registration process - and necessary in certain circumstances, but for the majority of our clients, signing documents in the presence of a conveyancer who explains the process and can answer the inevitable queries that clients have, is the only opportunity to engage meaningfully with the conveyancing profession and develop an appreciation for our role in what is in most cases the biggest financial transaction of their lives.

It would possibly be nice not to have to visit the Deeds Office - just as I no longer visit the Rates department - and transfer duty office, but perhaps the lack of interaction with my colleagues in the execution room and Deeds office personnel might be something I would come to miss.